Even post the listing, the government will still be the major shareholder and key manager, thus any future government intervention might be detrimental to shareholders.
Insurance is a complex business for novice investors to understand as many terms are based on lots of estimates and assumptions, new investors will take time to get used to insurance terms like embedded value, VNB margins, APE, GWP, etc.
There are concerns with the company like losing market share to private players, lower profitability and revenue growth compared to private players, lower VNB margins, and short-term persistency ratios. However, the company has made plans to address these issues and planning to take steps like increasing up-selling and cross-selling, increasing direct sales of their individual products on their website, designing products for the millennials, focusing more on non-par products, and protection based products, and linked products.
Life Insurance Corporation (LIC) is the largest life insurer in India, with 61.6 percent market share in terms of premiums (or GWP), and 71.8 percent market share in terms of the number of individual policies issued as of December 31, 2021. LIC is synonymous with insurance in India and enjoys a phenomenal brand recall.
We believe India’s highly underpenetrated life insurance space is still at a nascent stage and is attractively positioned to capture the huge growth opportunity.
LIC enjoys many competitive advantages like strong brand value, extremely large scale of operations, a huge network of agents, and an envious distribution network.
The issue is priced at ~1.1 times Embedded Value, which is at a steep discount compared to its Indian and global peers. Nevertheless, first-time investors must be aware that the business of insurance is long-term in nature; therefore we recommend this issue for the long term only.
(Parth Nyati is Founder, Tradingo-online stock trading app)
